Economy, opportunity seen leading to $599 Apple netbook

Faced with the perfect storm of a bleak market and a boom in ultra-budget portables, Apple is believed by some to be readying its own take on the netbook for the first half of 2009.

Analyst Ezra Gottheil from Technology Business Research (TBR) cautions that Apple may no longer have the luxury of keeping its notebook pricing high when many buyers are much more concerned about price than they were even a few months ago.

The company has until now insisted on keeping its prices largely unchanged and instead has upgraded the specifications of its systems to maintain that price. That has kept its average selling price high but has also all but locked the company out of the entry-level and developing-world markets; these are now being joined by cash-strapped customers even within the US, making it that much less likely any of them will pay Apple's minimum asking price. At $999, the least expensive MacBook is twice or more the cost of the most frugal Windows alternatives, Gottheil says.

Gottheil dismisses the notion of an artificial premium on Apple products, noting that they often compete well for the features, but is certain that the Cupertino, Calif.-based company has reached a breaking point where perceived quality can't override genuine financial woes from customers.

"It is too much to ask consumers to pay more than twice as much for a PC in these times," the analyst says.

Moreover, the market is also understood to be shifting away from the Mac's traditional price range. The sudden explosion in the popularity of netbooks —portables with 10-inch or smaller screens that are often based around low-power processors and meant for basic Internet use —has pushed the price of a notebook to as little as $300. Apple can't ignore this, Gottheil claims.

But while the Mac maker's chief Steve Jobs has argued that the iPhone is netbook-like in fulfilling many of the same online roles, the researcher believes that the desire for a keyboard ultimately the usefulness of the iPhone for certain software and that something more is necessary.

Instead, he and TBR are confident that Apple will release a computer in the netbook class within the first half of next year, but one that doesn't obey many of the rules dictated by the industry. Like the MacBook Air ultraportable, this future system would be at least as thin and light as others in its category but would potentially have a larger surface area to allow a larger display or more comfortable input. Netbook owners carry their systems "in stacks with papers and books" and care more about thickness than footprint, according to Gottheil.

Crucially, he also takes to heart Jobs' assertion that $500 systems are typically "junk" and believes that Apple will price the system at $599. The figure would be just low enough to draw customers who would pass over the plastic MacBook but high enough to avoid the risk Apple's co-founder perceives in dropping the price particularly low.

As with most Windows PC makers, Apple would reportedly have to accept the risk of cannibalizing sales for some of its more lucrative notebook models but could theoretically maintain its profit margins and continue to grow its Mac shipments ahead of the industry curve.

While the market conditions are widely accepted and are potentially supported by rumors of an unknown device being tested at Apple that would more closely fit the bill, Gottheil's statements do contradict some of Jobs' own beliefs about netbooks and Apple's role in the marketplace. He believes netbooks are part of a "nascent" category that may not pan out and has said he would be "surprised" if large volumes of notebook buyers shifted to the very bottom of the price spectrum and created problems for Apple.

Still, TBR's analyst warns that buyers, including those looking at Macs, were "more cautious" even in the summer and that Apple in its current position would gain share mainly at the expense of its revenue as users opt for less expensive models whenever possible.